Telefónica(TEF)2020-07-30 20:56Summary of Telefónica, S.A. Half Year 2020 Earnings Conference Call Company Overview - Company: Telefónica, S.A. (NYSE:TEF) - Date of Call: July 30, 2020 - Participants: - José María Álvarez-Pallete (Executive Chairman and CEO) - Ángel Vilá (COO) - Laura Abasolo (Chief Financial and Control Officer) - Pablo Eguirón (Head of Investor Relations) [2][6][7] Key Industry Insights - Industry: Telecommunications - Context: The call addressed the impact of the COVID-19 pandemic on the telecommunications sector, emphasizing the resilience and adaptability of Telefónica's operations during unprecedented economic uncertainty [8][9][10]. Core Financial Highlights - Revenue: - Total revenues for Q2 2020 were €10.3 billion, a decline of 14.8% year-on-year on a reported basis and 5.6% in organic terms [17]. - In core markets, revenues declined by 3.8% year-on-year [17]. - OIBDA: - OIBDA reached €3.3 billion, down 25.3% year-on-year or 10% organically [18]. - OIBDA minus CapEx was nearly flat, declining by only 0.7% in organic terms [18]. - Net Income: - Net income for Q2 was €425 million, with earnings per share at €0.23 for the first half of the year [18]. - Free Cash Flow: - Free cash flow improved sequentially in Q2, nearing €1 billion [18]. Operational Performance - Customer Retention: - Record Net Promoter Score (NPS) levels were achieved, indicating strong customer loyalty [8][12]. - Cost Management: - Operating expenses (OpEx) declined by 4.9% year-on-year in organic terms, while CapEx saw a 22.3% annual organic decline [12]. - Digital Transformation: - Digital sales increased by 53% year-on-year, with a significant shift towards online channels [49]. Strategic Initiatives - Sustainability: - Telefónica updated its target for net emissions to 0 by 2030, advancing from 2050 [13]. - Asset Monetization: - A €1.5 billion tower transaction in Germany was completed, doubling Telxius' scale to 33,000 towers [10]. - Expansion in Tech Services: - The tech services segment grew significantly, with cloud and cybersecurity revenues increasing by 27% and 20% year-on-year, respectively [33]. Market Outlook - Guidance for 2020: - The company reiterated a target of slightly negative to flat OIBDA minus CapEx growth year-on-year, with expectations of recovery based on observed trends in June and July [16]. - Dividend: - The 2020 dividend was confirmed at €0.40, payable in two tranches [15]. Challenges and Risks - COVID-19 Impact: - The pandemic resulted in an estimated revenue impact of nearly €730 million in Q2, with significant effects on roaming and service revenues [19][20]. - Currency Depreciation: - The depreciation of Latin American currencies against the euro negatively impacted revenues and OIBDA, with a €448 million impact on OIBDA [35]. Additional Insights - M&A Prospects: - Discussions around potential consolidation in the Spanish market were noted, with a focus on the ongoing transaction involving MásMóvil [66]. - Future Investments: - Continued investment in fiber-to-the-home networks and partnerships to enhance service offerings were emphasized [41][43]. This summary encapsulates the key points from Telefónica's earnings call, highlighting the company's financial performance, strategic initiatives, and market outlook amidst the challenges posed by the COVID-19 pandemic.